Energy Buzz

The Red And Blue Energy Platforms: Combining The Best Of Both Is What We Really Need

After a year of gasoline price shocks, homeowners are now beginning to feel the pinch of rising natural gas and fuel oil prices as they negotiate their home heating contracts. No wonder that energy issues have taken center stage in the presidential debates.

Senators John McCain and Barack Obama have distinct views about solutions to the nation's energy challenges. Senator Obama strongly favors stricter vehicle fuel economy standards, high-efficiency buildings, and establishing goals to grow renewable electricity. Senator McCain, on the other hand, strongly promotes nuclear energy and off-shore drilling. They both agree that clean coal needs to be researched, and that tackling climate change will require a GHG cap and trade system.

The candidates' areas of greatest commitment can be spotted in the table below. Each of the candidates has a long list of additional policy favorites; some are not included in the table because they are largely inconsequential. For instance, Senator Obama supports the release of oil from the strategic petroleum reserve, but experts generally agree that such a step would have a negligible impact on oil prices. Similarly, Senator McCain supports stronger enforcement of existing vehicle fuel economy standards by levying higher penalties for noncompliance, but experts generally agree that the effect on gasoline consumption would be minimal.

Energy Issue	Obama's Platform	McCain's Platform	Analysis
Vehicle Fuel Economy Standards	Increase fuel economy standards 4 percent per year, provide $4 billion in tax credits to allow automakers to retool their plants, put 1 million plug-in electric vehicles on the road by 2015.	Offer $300 million prize for improved batteries for hybrid and electric cars.	Obama's plan will guarantee reduction of oil use in the short-term; long-term impacts of both plans depend upon the success of advanced batteries.
Ethanol	Require at least 60 billion gallons of advanced biofuels by 2030; mandate all new vehicles are flex fuel by 2012; establish a national low carbon fuel standard to reduce the carbon of fuels by 10 percent within 10 years.	Eliminate mandates, subsidies, tariffs and price supports that focus exclusively on corn-based ethanol.	McCain's plan tackles the food versus fuel dilemma; Obama's plan promotes advanced ethanol, which does not compete with food but requires more R&D to be affordable.
High-Efficiency Buildings and Electric Grid	Set building efficiency goals for all new buildings, overhaul federal appliance efficiency standards, decouple utility profits from sales, reduce electricity demand 15 percent from projected levels by 2020, weatherize one million low-income homes annually for the next decade, invest in a smart grid.	Improve the efficiency of federal government buildings, upgrade the national grid, deploy smart meters.	Obama's plan promotes widespread energy efficiency; McCain's plan for energy efficiency is much more limited.
Renewable Power	Ensure 10 percent of U.S. electricity comes from renewable sources by 2012, and 25 percent by 2025, extend the federal Production Tax Credit for renewable energy for 5 years.	Rationalize the current patchwork of temporary tax credits for renewable energy.	Obama's plan sets aggressive targets for renewable power; McCain's plan does not.
Oil and Natural Gas	Impose a 50 percent windfall profits tax on U.S. oil companies.	End drilling bans on all offshore waters beyond 50 miles, no new taxes on oil companies.	McCain's plan would expand U.S. oil and gas production; Obama's plan would not.
Nuclear Energy	Address security issues before considering expanded nuclear power, no to the Yucca Mountain nuclear waste repository.	Build 45 new nuclear power plants by 2030, limit the further spread of enrichment and reprocessing, complete the Yucca Mountain nuclear waste repository, support research on nuclear waste reprocessing.	McCain's plan calls for expanded U.S. nuclear power production; Obama's plan does not.
Clean Coal	Create five demonstration coal sequestration plants.	Commit $2 billion annually to advance clean coal technologies.	Both plans would expand research to develop clean coal technologies.
Greenhouse Gas (GHG) Cap and Trade System	Implement a cap and trade system to reduce GHG by 80 percent from today's levels by 2050, auction all pollution credits and use revenues to invest in a clean energy future.	Return GHG emissions to 2005 levels by 2012, implement a GHG cap and trade system with mandatory reductions of GHG emissions to 66 percent below 2005 levels by 2050.	Both plans call for aggressive carbon reduction goals over the long run.

At first blush, some of these initiatives may seem monumental, but upon further inspection, their impact can shrink. For example, Senator Obama's commitment to a four percent annual increase in fuel economy standards would bring average new vehicle fuel economy to 40 mpg in 2020 – 48 percent better than today's fleet. But this is just a modest improvement over the 35 mpg (or 40 percent improvement) already required of new vehicles by 2020 as mandated by the Energy Independence and Security Act in 2007.

Senator Obama's goal of reducing electricity demand 15 percent from projected levels by 2020 is more meaningful. Rather than growing U.S. electricity consumption by approximately one percent each year, to 4,477 billion kilowatt hours in 2020, this policy would shrink U.S. electricity consumption back to 2005 levels. Senator McCain's nuclear proposal is also significant.

The side-by-side figures show how carbon dioxide emissions from electricity would be impacted by the candidates' alternative platforms for clean electric power. Senator Obama's focus on demand reduction and setting goals for increased non-hydro renewables would achieve major carbon dioxide emissions quickly; Senator McCain's focus on nuclear power would take longer to reduce carbon dioxide emissions by displacing coal and natural gas power plants.

Neither candidate has focused on reforming existing laws and policies that place clean energy technologies at a comparative disadvantage. New energy technologies constantly face numerous barriers as they attempt to take hold in the marketplace, but perhaps the most troubling of these are the obstacles that our own legislatures and regulators impose, often as unintended consequences of well-intended policies. For example:

• The Clean Air Act and its various amendments have "grandfathering" clauses and "new source review" provisions that promote the continued operation of some of the most polluting power plants in the country.
• The IRS provides business deductions for the purchase of large light trucks (> 6,000 lbs) whether they are needed or not – a "hummer-dinger" of a tax break.
• Utilities and Independent System Operators require costly studies and levy numerous tariffs on small generators seeking to connect with the grid, which discourages the development of distributed, high-efficiency power delivery.
• In 2005, the U.S. Department of the Interior was given authority for offshore wind siting; three years later, the agency still has not specified its site permitting procedures.

Both candidates should commit to a vigorous campaign of policy reform to fix such problems – and these are just a few of them (a paper forthcoming in the Stanford Law and Policy Review describes more than 30).

Energy policies are needed to achieve a range of critical national goals including oil security and electricity reliability, environmental quality, and economic growth. Neither the blue nor the red energy platform is sufficient to achieve all of these. The best of both must be combined.

For oil security and electricity reliability, we need to expand domestic oil and natural gas production, diversify our energy resources to include more renewables, and strengthen our energy infrastructure – especially the electric grid and pipeline networks. To address global warming, we need to push on all of the principal low-carbon technologies: energy efficiency, renewables, nuclear energy, and clean coal. To sustain economic growth, energy efficiency is essential since it is the fastest, cheapest and cleanest energy resource, and it creates jobs. Energy efficiency therefore, needs to be the centerpiece of any short-term action plan.

Hopefully the presidential debate will provide a venue for ensuring that the winning candidate promotes the best of both energy platforms.